Abstract

China’s macro economic operation situation, due to the impact of the global financial crisis, since July2011, the national consumer price total level began to decline from6.45%over the previous year, to1.7%in October2012. China’s macroeconomic situation began to show the trend of rapid transition from inflation to deflation. Although China has not yet entered the serious deflation, but China facing deflationary pressure is still severe, its negative impact has been reflected in the macro economic, business investment reduced, rising unemployment, falling exports and consumer spending slowdown, business profit decline, increased debt burden. In addition, the current situation and the future population trends for the future lead to deflation, affect the sustained economic growth is also worth studying. Correct understanding of deflation, find the Chinese economy is facing potential causes of deflation, how to avoid deflation, find a reasonable solution, is the current problems needed to study.This thesis will base on the demand falling theory, analysis of the current external demand and internal demand, and demand due to demographic factors caused by changes in the future. Through analyzing the characteristics of the current economic structure in China, I found that unreasonable structure of our country’s economy is the root cause of the relative surplus production capacity. China’s economic system reform lags behind, hindering the development of private economy, affected the sustainable development of the whole national economy. But the population of our country current situation and future trend of the population, in the future lead to deflation, on economic impact is the most easy to ignore the problem, the problem of the damage of economy in our country in the future will also is the biggest of all. So, on the issue of governance deflation, should adopt combination of fiscal policy and monetary policy, adjust the economic structure, promote the development of private economy, and redesign the population strategy and other measures.